Best guide IFRS 16 Lessor modifications

Best guide IFRS 16 Lessor modifications

summarises the accounting for lessor modifications that depends on – and may change – the lease classification.

Unlike IAS 17 Leases, the new standard provides detailed guidance on the lessor accounting for lease modifications, with separate guidance for modifications to finance leases and operating leases.

However, additional complexities arise for modifications of a finance lease receivable not accounted for as a separate lease for which, under paragraph 80(b) of IFRS 16, the lessor applies the requirements of IFRS 9 Financial Instruments. A number of issues arise due to differences in the basic concepts between IFRS 16 and IFRS 9.

The following diagram summarises the accounting for lease modifications by a lessor.

Best guide IFRS 16 Lessor modifications

Separate lease Not a separate lease – Finance to operating Not a separate lease – Finance to finance Lessor modifications to operating expenses

* A lessee reassessment of whether it is reasonably certain to exercise an option to extend, or not to exercise a termination option, included in the original lease contract is not a lease modification

Read more

Related IFRS posts

Contract enforceability and termination clauses – The best complete 1 read

Contract enforceability and termination clauses is about those troubles, get your money as entitled or end a contract before you lose too much money. Contract enforceability of rights (AND obligations) in a contract is a matter of law. An entity has to determine the duration of the contract (i.e., the stated contractual term or a shorter period) before applying certain aspects of the revenue model (e.g., identifying performance obligations, determining the transaction price).

The contract duration under IFRS 15 is the period in which parties to the contract have present enforceable rights and obligations. An entity cannot Contract enforceability and termination clauses - The best complete 1 read 1 assume that there are present enforceable rights and obligations for the entire term stated in the contract and it is likely that an … Read more